Japan to extend $850m loan to Mongolia

ULAANBAATAR: Japan has committed $850 million in loans to Mongolia to help rescue the country’s struggling economy, Mongolia’s Finance Ministry said on Wednesday.

Mongolia, landlocked between China and Russia, agreed to a $5.5 billion bailout from the International Monetary Fund (IMF) as well as other institutions and countries in February.

The cash-strapped Asian country saw its economy grow just 1 percent last year, its lowest in seven years, and it has struggled to maintain the value of its currency and manage its debts following a collapse in foreign investment and a decline in commodity prices.

The $850-million loan from Japan was agreed during a visit to Tokyo this week by the chairman of Mongolia’s Parliament, Miyeegombo Enkhbold, said an official at the Finance Ministry. Negotiations have not yet been completed, the official added.

“This amount is almost equal to all soft loans provided by Japan to Mongolia since its transition to a democracy and market economy,” said Dale Choi, an analyst at Mongolian Metals & Mining.

The loan comes in addition to the three- year International Monetary Fund (IMF) Extended Credit Facility worth $440 million, as well as an extension to a 15 billion yuan ($2.18 billion) swap line Mongolia’s central bank has agreed with the People’s Bank of China (PBoC).

Japan and South Korea, will provide up to $3 billion in aid, the IMF said in its February announcement.

Lawmakers, however, must still act to ensure the bailout goes through when Mongolia’s Parliament reconvenes on April 5 after a recess.

As part of the IMF deal, Parliament is expected to vote on legislation that will generate reve- nue and reduce spending, with hikes in taxes and cuts in social welfare expected.

Mongolia’s pivot to Japan and South Korea for expanded trade and development is the result of its “Third Neighbor” policy strategy aimed at easing its dependence on Russia and China. Mongolia has been one of the countries most affected by China’s economic slowdown.

Last year, Japan and Mongolia enacted a free-trade agreement that grants zero tax on certain imports and exports, including Mongolian coal and cashmere.